Margins matter. The more Vantiv
Here's the current margin snapshot for Vantiv over the trailing 12 months: Gross margin is 54.9%, while operating margin is 16.5% and net margin is 3.1%.
Unfortunately, a look at the most recent numbers doesn't tell us much about where Vantiv has been, or where it's going. A company with rising gross and operating margins often fuels its growth by increasing demand for its products. If it sells more units while keeping costs in check, its profitability increases. Conversely, a company with gross margins that inch downward over time is often losing out to competition, and possibly engaging in a race to the bottom on prices. If it can't make up for this problem by cutting costs -- and most companies can't -- then both the business and its shares face a decidedly bleak outlook.
Here's the margin picture for Vantiv over the past few years.
Source: S&P Capital IQ. Dollar amounts in millions. FY = fiscal year. TTM = trailing 12 months.
Because of seasonality in some businesses, the numbers for the last period on the right -- the TTM figures -- aren't always comparable to the FY results preceding them. To compare quarterly margins to their prior-year levels, consult this chart.
Source: S&P Capital IQ. Dollar amounts in millions. FQ = fiscal quarter.
Here's how the stats break down:
- Over the past five years, gross margin peaked at 54.9% and averaged 51.6%. Operating margin peaked at 28.7% and averaged 21.3%. Net margin peaked at 17.2% and averaged 6.4%.
- TTM gross margin is 54.9%, 330 basis points better than the five-year average. TTM operating margin is 16.5%, 480 basis points worse than the five-year average. TTM net margin is 3.1%, 330 basis points worse than the five-year average.
With recent TTM operating margins below historical averages, Vantiv has some work to do.
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Seth Jayson had no position in any company mentioned here at the time of publication. You can view his stock holdings here. He is co-advisor of Motley Fool Hidden Gems, which provides new small-cap ideas every month, backed by a real-money portfolio. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.